IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE CITY OF MONROE EMPLOYEES’ RETIREMENT SYSTEM, derivatively on behalf of TWENTY-FIRST CENTURY FOX, INC., Plaintiff, v. RUPERT MURDOCH, LACHLAN MURDOCH, JAMES MURDOCH, CHARLES G. CAREY, DAVID F. DEVOE, RODERICK I. EDDINGTON, ROGER S. SILBERMAN, JACQUES A. NASSER, JAMES W. BREYER, JEFFREY W. UBBEN, VIET DINH, DELPHINE ARNAULT, TIDJANE THIAME, AND THE ESTATE OF ROGER AILES, Defendants, and TWENTY-FIRST CENTURY FOX, INC., Nominal Defendant. C.A. No. 2017-0833-AGB PLAINTIFF’S BRIEF IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF PROPOSED SETTLEMENT AND ENTRY OF SCHEDULING ORDER EFiled: Nov 20 2017 02:01PM EST Transaction ID 61379249 Case No. 2017-0833-AGB
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE · 11/20/2017 · highly-rated “Fox and Friends” morning show, sued Roger Ailes, the former Chief Executive Officer of Fox News
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
CITY OF MONROE EMPLOYEES’
RETIREMENT SYSTEM, derivatively on
behalf of TWENTY-FIRST CENTURY
FOX, INC.,
Plaintiff,
v.
RUPERT MURDOCH, LACHLAN
MURDOCH, JAMES MURDOCH,
CHARLES G. CAREY, DAVID F.
DEVOE, RODERICK I. EDDINGTON,
ROGER S. SILBERMAN, JACQUES A.
NASSER, JAMES W. BREYER,
JEFFREY W. UBBEN, VIET DINH,
DELPHINE ARNAULT, TIDJANE
THIAME, AND THE ESTATE OF
ROGER AILES,
Defendants,
and
TWENTY-FIRST CENTURY FOX,
INC.,
Nominal Defendant.
C.A. No. 2017-0833-AGB
PLAINTIFF’S BRIEF IN SUPPORT OF MOTION FOR
PRELIMINARY APPROVAL OF PROPOSED SETTLEMENT
AND ENTRY OF SCHEDULING ORDER
EFiled: Nov 20 2017 02:01PM EST Transaction ID 61379249
Case No. 2017-0833-AGB
BERNSTEIN LITOWITZ BERGER
& GROSSMANN LLP
Max W. Berger
Mark Lebovitch
David L. Wales
Rebecca E. Boon
David MacIsaac
1251 Avenue of the Americas
New York, NY 10020
(212) 554-1400
GRANT & EISENHOFER P.A.
Stuart M. Grant (Del. Bar No. 2526)
Michael J. Barry (Del. Bar No. 4368)
123 Justison Street
Wilmington, DE 19801
(302) 622-7100
SULLIVAN, WARD, ASHER &
PATTON, P.C.
Cynthia Billings-Dunn
25800 Northwestern Highway
1000 Maccabees Center
Southfield, MI 48075-8412
(248) 746-2747
Counsel for Plaintiff
Plaintiff City of Monroe Employees’ Retirement System, derivatively on
behalf of Twenty-First Century Fox, Inc., submits this brief in support of Plaintiff’s
Motion for Preliminary Approval of Proposed Settlement and Entry of Scheduling
Order.
I. INTRODUCTION
On July 6, 2016, Gretchen Carlson (“Carlson”), former co-host of the
highly-rated “Fox and Friends” morning show, sued Roger Ailes, the former
Chief Executive Officer of Fox News (“Fox News”), Twenty-First Century
Fox, Inc.’s (“21CF” or the “Company”) prized subsidiary, for sexual
harassment and wrongful termination. Carlson’s lawsuit unleashed a torrent of
allegations of sexual misconduct, racial discrimination, and retaliation within
Fox News, resulting in the disclosure of prior settlements of sexual harassment
claims lodged by Fox News employees, and myriad additional lawsuits against
the Company and Fox News.
Carlson’s lawsuit, and the resulting public disclosures regarding Ailes, its
highest-profile talent, Bill O’Reilly (“O’Reilly”), and other Fox News employees
depicted a toxic culture within Fox News that festered over many years. The
proposed settlement here (the “Settlement”) is the product of fifteen months of
discovery, and complex arm’s length settlement negotiations conducted out of the
public eye and overseen by a nationally known and highly respected former federal
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judge. If approved and implemented, the Settlement would provide significant
compensation for damages incurred by the Company arising from the alleged
misconduct at Fox News. More importantly, the Settlement would implement
significant corporate changes to effect a fundamental transformation of that culture
going forward. This will ensure that the kind of wrongdoing that went unchecked
in the past will not repeat itself.
Over the last year, the Company has produced over 13,000 pages of
discovery to Plaintiff in response to an inspection demand made pursuant to
Section 220 of the DGCL. In addition, by agreement with the Company,
Plaintiff’s counsel interviewed or deposed numerous witnesses, including legal
personnel, Board members, and senior business people at Fox News and 21CF. In
negotiating the Settlement, Plaintiff’s counsel worked closely with experts in the
fields of harassment, discrimination, and retaliation, as well as corporate
governance. The Settlement of the derivative claims provides a blockbuster result
for 21CF and its public stockholders, and achieves historic governance reforms
that could not have been achieved through litigation alone.
First, in terms of the financial accountability, the insurers for the Company
and its officers and directors will pay the Company $90 million. This is one of the
largest derivative settlements ever, and we believe the largest ever in a case
focused strictly on a board’s oversight failure.
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Second, the Settlement creates the “Fox News Workplace Professionalism
and Inclusion Council,” which is comprised of a majority of independent members
and two new senior human resources executives (one from 21CF and the other
from Fox News). The Council is charged with providing independent oversight
and guidance of the Company’s and Fox News’s implementation of meaningful
reforms to address Fox News’s prior harassment, discrimination and retaliation
issues. The members of the Council include a widely respected former federal
judge, and three other highly qualified members with substantial expertise in
addressing issues of harassment, discrimination, retaliation and best practices for
improving inclusion. To our knowledge, this programmatic relief is unique and
has not been incorporated into a derivative action settlement until now.
Third, this programmatic relief provides that the 21CF Board will be
informed of the problems and the steps being taken to address the problems.
Moreover, public reporting by the Council, including the issuance of minority
reports if decisions are not unanimous, will make it impossible for 21CF to keep
the world in the dark if it fails to act in good faith to address these serious issues.
From the beginning, Plaintiff and its counsel have been steadfast in their
commitment to litigating this case for the good of the Company, their strongly held
belief that there were serious problems at Fox News and 21CF, and their
conviction that both bold action and effective plans were required to address them.
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The Settlement, especially the creation of the Council and the programmatic relief
empowering the Council, is precisely the bold action that Fox News requires.
This historic settlement, however, should not be viewed in isolation. Over
the past several months the news has been filled with shocking (and oftentimes
grotesque) stories of sexual harassment, retaliation and worse conduct at numerous
companies. Corporate boards can no longer pretend that such conduct is isolated,
nor can corporate boards pretend that such conduct does not and will not pose a
grave risk to companies and their stockholders. The Council and the programmatic
relief here should be a model for the many other companies facing these issues.
II. BACKGROUND FACTS
On July 6, 2016, Carlson, former co-host of the highly-rated “Fox and
Friends” morning show, sued Ailes for sexual harassment and wrongful
termination. Compl. ¶¶71-73. In the wake of Carlson’s filing, there was a barrage
of media coverage, as more than a dozen women came forward to report instances
of sexual harassment and retaliation at the network. Id. ¶74. In response, 21CF